WASHINGTON — Sales at apparel and accessories stores fell a seasonally adjusted 2 percent in December, while department store sales dipped 0.4 percent, amid heightening anxiety the economy is on the brink of a recession.

Total retail sales fell 0.4 percent in December, marking the worst decline in six months, the Commerce Department reported Tuesday.

While the overall holiday selling season, combining sales for November and December, was not as weak as retailers had expected, the December sales data revealed that consumers continued to tighten their purse strings in light of a weaker employment picture, skyrocketing gasoline prices, a credit crunch and a downturn in the housing market.

“Consumer spending is facing increased headwinds and choppy water from the recent surge in energy and gasoline prices and the steady erosion in the value of homes across many metro areas throughout the country,” Global Insight U.S. economist Brian Bethune wrote in an analysis. “While the recent stepping up of marketing programs and discounts kept the retail sales ship afloat in the fourth quarter, sales lost momentum in December, and that weakening pattern is showing strong evidence of continuing in January.”

Compared with November, sales at apparel and accessories stores fell 2 percent to $18.6 billion, while sales at department stores fell 0.4 percent to $17.2 billion. Against a year ago, sales at apparel and accessories stores rose 1.7 percent as volume at department stores fell 2.3 percent.

Scott Hoyt, director of consumer economics for Moody’s Economy.com, said the retail sales picture should be considered in the context of November and December.

“Anecdotally, we know that retailers did very well on Black Friday, but that seemed to borrow sales from December,” said Hoyt, pointing to a shift in the number of shopping days, which resulted in more post-Thanksgiving shopping days this year, at the expense of days in December.

The two-month average in sales for clothing and accessories stores was a 0.4 decline, while the average for department stores was a gain of 0.1 percent, Hoyt said.

“When you look at November and December together and the trends over the last six months, we’re seeing weak growth in spending — probably the weakest we’ve seen in the aftermath of the recession at the start of the decade — but we are not seeing a collapse,” Hoyt said. “Clearly consumer finances are very stretched right now. A couple of years ago when consumers saved a little more than now, it was easier to dip into savings to finance the higher energy prices, but that is getting more and more difficult now,” due to a very low savings rate.

This story first appeared in the January 16, 2008 issue of WWD.  Subscribe Today.

Hoyt said Moody’s Economy.com does not believe the economy is in a recession although it is “close and the risk of entering one is high,” which does not bode well for consumer confidence, spending or retailers.

Federal Reserve chairman Ben Bernanke sent strong signals last week that the Fed is worried about weak growth and will continue to cut interest rates to prevent the economy from sliding into a recession.

Economic woes, driven by the subprime mortgage crisis, have also become a major topic in the White House, on the presidential campaign trail and in Congress. President Bush has indicated he is considering an economic stimulus package and Senate Majority Leader Harry Reid (D., Nev.) and House Speaker Nancy Pelosi (D., Calif.) have told Bush they are ready to work together on crafting a stimulus package that Congress can pass.

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